Chapter 10

The tax on hope

Published 30 September 2026

There is one participant in this market who never loses, never trades, and gets paid on every single order in both directions: the government. The securities transaction tax is the state's seat at the table - and in the same year the regulator published proof that nine in ten players lose, the state raised its cut of the game.

From October 1, 2024, the securities transaction tax on futures rose to 0.02% from 0.0125%, and on options to 0.1% from 0.0625% - a 60% jump in the tax on each side of the trade. The stated purpose, as reported from Budget 2024, was deterrence: raise the cost of speculative trading to cool the retail F&O frenzy the Economic Survey and SEBI had flagged. Read that logic slowly. The state's answer to a casino harming its citizens was not to close the casino. It was to raise the entrance fee - payable to the state.

The meter that runs on everyone

The STT is only the most visible toll. Under it sits the full meter: brokerage, exchange transaction charges, SEBI turnover fees, stamp duty, GST on the lot. The SEBI study's tables let you total the meter's take. In FY24, individuals and others lost over ₹61,000 crore gross - but about ₹75,000 crore net of transaction costs. The difference, on the order of ₹14,000 crore in a single year, is the toll: money that was never anyone's trading loss, extracted from winners and losers alike, order by order.

Who pays it matters as much as how much it is. The study's profit-and-loss tables show profit-makers surrendered about 22% of their gross profits to transaction costs, while loss-makers paid costs of about 27% on top of their gross losses. The toll is regressive by construction: it taxes the loser harder than the winner, and it taxes every churn of the account - so the trader who loses slowly, order after order, week after week, pays the meter many times over on the way down.

What ₹14,000 crore a year buys

That annual toll is real money in any ledger. It flows to brokers as brokerage, to exchanges as transaction charges, to depositories and the regulator as fees, and to the exchequer as STT and GST. Every recipient of it has a structural interest in volume - in the crowd trading more, not better. The exchanges earn per order. The brokers earn per order. The state earns per order. The only participant whose outcome depends on the trade itself is the human placing it, and he is the only one not guaranteed a cut. This is the alignment problem at the heart of the market, priced: fourteen thousand crore rupees a year of incentives, all pointing at more orders, none pointing at better outcomes.

Nineteen thousand a head, before the losses

Divide the meter's annual take by the number of people it is collected from and the abstraction gets a face. Roughly ₹14,000 crore of FY24 transaction costs, spread across the 73 lakh individual traders who lost money that year, comes to about ₹19,000 per losing trader - paid in fees and taxes before the trading loss itself is counted. For the three out of four traders in the study earning below ₹5 lakh a year, that is close to two weeks of income every year handed to the machine's attendants, win or lose. The toll is not a rounding error on the way to a fortune. For the median participant, it is a material, recurring, guaranteed transfer - the one line item in the entire enterprise that never has a bad quarter.

Every hand at the meter

Follow the ₹19,000 and it fans out across the whole apparatus. The broker takes brokerage on every leg. The exchange takes a transaction charge on every leg - and after the October 2024 changes, both major exchanges moved to a uniform fee structure, so the venue's cut no longer depends on which door you entered. SEBI takes its turnover fee. The state takes stamp duty and STT. GST rides on the brokerage and the fees. Five separate hands reach into every order, and not one of them is exposed to the outcome of the trade. When the market's architects say "we don't benefit from your losses", it is true only in the narrowest sense: they benefit from your activity, and your activity - per the regulator's own study - is the losses.

The deterrence that wasn't

Did the higher tax deter? The budget's theory was that pricier trades mean fewer trades. What the first full quarter after the hike showed - from the listed brokers' own results - was a fall in order flow driven mostly by the expiry and contract-size changes, while the tax simply made every remaining trade more expensive for the same 91% who lose. A deterrence that leaves the game open and collects more from the losers is not deterrence. It is a vice tax - and vice taxes have a logic of their own: the state becomes a stakeholder in the habit it claims to be curing.

That is the uncomfortable symmetry this chapter exists to record. The regulator publishes the study proving the crowd is being skinned. The state reads the same study and raises its percentage of the skinning. Both acts are public, legal, and defensible in isolation. Together they describe a system in which every institution at the table - referee included, taxman included - eats from the same pot, and the pot is the crowd. The tax on hope is collected whether or not the hope pays out. It is the surest bet in Indian finance, and you are not the one holding it.